VINODA B JAIN, MUMBAI V. JT CIT SP RG 33, NASHIK

ITA 676/MUM/2014

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 83888 (ITAT-MUMBAI)
• Duration Of Justice: 7 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-09-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 20-05-2014
• Assessment Year: 1991-1992
• Appeal Filed On: 29-01-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R R PRASAD; VALLI NATRAJAN
• Assessee Lawyers: N M PORWAL
• Keywords: Reopening of assessment; Principle of natural justice; Period of limitation; Block assessment; Revised return; Reason to believe; Reassessment proceedings
• Section: 147; 69; 148; 132

Judgement Text

, INCOME TAX APPELLATE TRIBUNAL,MUMB AI - F BENCH. . , !' #$%& , $ '( BEFORE S/SH.D.MANMOHAN, VICE-PRESIDENT & RAJEND RA,ACCOUNTANT MEMBER /. ITA NO.676/MUM/2014, ) ) ) ) / ASSESSMENT YEAR-1991-92 VINODA B. JAIN (LEGAL HEIR OF LATE SHRI BHARAT JETHMAL JAIN) VIGHNAHARTA CHS, 'B' WING, FLAT NO. 808, 8TH FLOOR, MAHADEO PALAV MARG,NEW ISLAM MILL COMPOUND, CURREY ROAD, MUMBAI-400012 PAN:AZBPS4783F V/S. JCIT SPL. RANGE 33, MUMBAI. ( *+ / APPELLANT) ( ,-*+ / RESPONDENT) ./ ./ ./ ./ 0 0 0 0 $ $$ $ / ASSESSEE BY : SHRI N.M. PORWAL #( 1 0 $ / REVENUE BY : SHRI R.R. PRASAD AND VALLI NATRAJAN 1 11 1 / / / / / DATE OF HEARING : 19-09-2014 2) 1 / / DATE OF PRONOUNCEMENT : 24-09-2014 , 1961 1 11 1 254 (1) $ $$ $ %/3/ %/3/ %/3/ %/3/ '$4 '$4 '$4 '$4 ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA,AM $ $ $ $ '( '( '( '( #$%& #$%& #$%& #$%& $ $$ $ : CHALLENGING THE ORDER DT. 13.11.2013OF THE CIT(A)-2 9,MUMBAI, ASSESSING OFFICER (AO) /ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL : ADDITION - CASH SEIZED AT RS.2,60,000/-:- 1.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE , THE CIT(A) ERRED IN CONFIRMING ADDITION OF SEIZED CASH OF RS.2,60,000/- APPEARING IN ITS BOOKS OF ACCOUNTS ON 11 TH DECEMBER, 1990 WITHOUT REJECTING THE BOOKS OF ACCOUNTS U/S. 145(3) OF THE INCOME-TAX ACT, 1961. 1.1.THE CIT(A) ERRED IN NOT APPRECIATING APPELLANT S LETTER DATED 5TH JULY 2006 WHEREIN THE APPELLANT PRODUCED ZEROX COPIES OF BOOKS OF ACCOUNT S BUT THE ASSESSING OFFICER INSISTED ON ORIGINAL BOOKS AND ALSO DECLINED TO VERIFY THE SAME FOR WANT OF TIME. 1.2.THE CIT(A) ERRED IN NOT APPRECIATING THAT THE A PPELLANT HAD FILED HIS RETURN OF INCOME FOR THE ASSESSMENT YEAR 1989-90 SHOWING TEXTILE / CLOTH BUS INESS ON -- OCTOBER, 1989 EVEN PRIOR TO THE DATE OF SEARCH AND THE SEIZED CASH OF RS.2,60,000/- WAS OUT OF THE AVAILABLE CASH BALANCE OF RS.2,73,396/-AS ON 11 TH DECEMBER, 1990 IN THE BOOKS OF ACCOUNTS. 1.3.THE CIT(A) ERRED IN NOT APPRECIATING THAT THE A SSESSING OFFICER IN HIS ORDER DATED 24TH DECEMBER, 1999 AT PAGE NO. 4PARA 4 HAS GIVEN A FIND ING THAT THE APPELLANT WAS DOING BUSINESS IN TEXTILE IN A SMALL WAY. 1.4.THE CIT(A) ERRED IN NOT APPRECIATING THAT ONCE THE BOOKS OF ACCOUNTS ARE ACCEPTED AS CORRECT AND COMPLETE BY HIM, THE CASH BALANCE SHOWN IN THE BOOKS OF ACCOUNTS AS ON 11TH DECEMBER, 1990 AND SEIZED BY THE CUSTOMS AUTHORITIES ON 11TH DECEM BER, 1990 OUGHT TO BE ACCEPTED AS CORRECT. ADDITION TOWARDS GOLD BALLS AND JEWELLERY SEIZED: 2.THE CIT(A) ERRED IN NOT APPRECIATING THAT BOTH AT THE TIME OF ORIGINAL ASSESSMENT AS WELL AS DURING THE REMAND PROCEEDINGS, THE DEPARTMENT FAILE D TO VERIFY FROM THE INCOME-TAX DEPARTMENT, GUNTUR ABOUT THE VERACITY / CORRECTNESS OF THE VARIOUS DOCUMENTS / EVIDENCE PRODUCED BY THE APPELLANT. 2.1.THE CIT(A) ERRED IN NOT ALLOWING ENTIRE VALUE O F GOLD BALLS MELTED FROM OLD FAMILY JEWELLERY PARTICULARLY WHEN THE APPELLANT SUBMITTED VARIOUS A FFIDAVITS OF FAMILY MEMBERS AND WEALTH TAX RETURNS AT THE TIME OF ORIGINAL ASSESSMENT AS WELL AS REMAND PROCEEDINGS. 3.THE CIT(A) ERRED IN NOT APPRECIATING THAT THE ASS ESSING OFFICER FAILED TO PROVIDE THE COPY OF THE REASONS RECORDED BEFORE ISSUANCE OF NOTICE U/S. 148 (2) DESPITE SEVERAL REMINDERS BY THE APPELLANT 2 ITA NO. 676/M/2014 SMT. VINODA B. JAIN WITHOUT PROVIDING AN OPPORTUNITY TO THE APPELLANT T O SUBMIT HIS OBJECTIONS TO REOPENING OF THE ASSESSMENT. 4.THE CIT(A) ERRED IN NOT APPRECIATING THAT THE ASS ESSING OFFICER FAILED TO ISSUE MANDATORY NOTICE U/S. 143(2) WITHIN THE TIME PRESCRIBED. 5.THE CIT(A) ERRED IN NOT APPRECIATING THAT THE ASS ESSING OFFICER ERRED IN MAKING AN ASSESSMENT ON THE DEAD PERSON. THE APPELLANT CRAVES LEAVE TO ADD, TO AMEND, ALTER OR VARY THE GROUNDS OF APPEAL EITHER BEFORE OR AT THE TIME OF HEARING OF THE APPEAL. FOLLOWING ADDITIONAL GROUNDS WERE ALSO FILED BY THE ASSESSEE. 1.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE , THE CIT(A) ERRED IN NOT APPRECIATING THAT PROVISIONS OF SECTION 147/-148 OF THE INCOME-TAX AC T,1961 CANNOT BE APPLIED IN THE CASE BLOCK ASSESSMENT UNDER CHAPTER XIV-B. 2.THE CIT(A) ERRED IN NOT APPRECIATING PROVISIONS O F SECTION 158BA WHEREIN IT HAS BEEN CLEARLY LAID DOWN THAT THE ASSESSING OFFICER SHALL PROCEED TO ASSESS UNDISCLOSED INCOME IN ACCORDANCE WITH THE PROVISIONS OF CHAPTER- XIB-B. THE APPELLANT CRAVES LEAVE TO ADD, TO AMEND, ALTER OR VARY THE GROUNDS OF APPEAL EITHER BEFORE OR AT THE TIME OF HEARING OF THE APPEAL. AS THE ADDITIONAL GROUNDS RAISED BY THE ASSESSEE AR E LEGAL IN NATURE AND DO NOT REQUIRE INVESTIGATIONS OF FACTS FURTHER,SO,WE ADMIT THE SAM E UNDER RULE 11 OF ITAT RULES,1963. WE FIND THAT THE ASSESSEE HAD CHALLENGED THE ORDER ON MERITS AS WELL AS ON THE JURISDICTION.IN OUR OPINION BEFORE GOING IN TO THE MERITS OF CASE THE J URISDICTIONAL ISSUE HAS TO BE RESOLVED.WE WOULD LIKE TO GIVE BRIEF HISTORY OF THE MATTER. 2. ON11.12.1999,CENTRAL EXCISE AUTHORITIES HAD SEIZED FIVE GOLD BALLS AND GOLD ORNAMENTS, WEIGHING 1545 GMS.AND CASH OF RS. 2.6 LAKHS, FROM T HE RESIDENTIAL PREMISES OF THE ASSESSEE. ON 12.03.2006 AND 17.04.1996 THE ABOVE SEIZED ASSETS W ERE TAKEN OVER BY THE INVESTIGATION WING OF THE DEPARTMENT U/S.132A OF THE ACT. ORDER U/S. 132 (5) OF THE ACT WAS PASSED ON 09. 07.1996.A NOTICE U/S.148 OF THE ACT,WAS ISSUED TO THE ASSESSE E ON 31.03.1996 CALLING FOR RETURN OF INCOME FOR AY. UNDER CONSIDERATION.THE ASSESSEE FILED HIS RETU RN SHOWING INCOME OF RS.15,009/-.THE AO FINALISED THE ASSESSMENT ON 04.03.1999 U/S.143(3) R .W. SECTION 147(A) OF THE ACT,DETERMINING THE INCOME OF THE ASSESSEE AT RS. 10.27 LAKHS.AGGRIEVED BY THE ORDER OF THE AO,HE PREFERRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY (FAA),W HO VIDE HIS ORDER DATED 24.12.1999 DISMISSED THE APPEAL FILED BY THEASSESSEE. HE CHALLENGED THE ORDER OF THE FAA BEFORE THE TRIBUNAL.VIDE ITS ORDER DATED 09.08.2004,(ITA/ 1294/ MUM/2000)'G' BEN CH OF THE MUMBAI TRIBUNAL REMITTED THE MATTER BACK TO THE FILE OF THE FAA TO DECIDE THE MA TTER AFRESH. WHILE DECIDING THE MATTER IN PURSUANCE OF THE ITAT' S ORDER,THE FAA DELETED CERTAIN ADDITIONS MADE BY THE AO. HOWEVER,HE UPHELD THE ADDITION OF R S. 2.60 LAKHS AND ADDITION MADE BY THE AO.WITH REGARD TO THE 5 GOLD BALLS WEIGHING 1545 GM S.,HE DIRECTED THE AO TO FILE A REMAND REPORT.HE FOUND THAT THE AO HAD NOT CARRIED OUT ANY VERIFICATION AS DIRECTED BY HIM, ABOUT THE EVIDENCES FURNISHED BY THE AUTHORISED REPRESENTATIV E(AR) OF THE ASSESSEE WITH REGARD TO THE OWNERSHIP OF THE GOLD ORNAMENTS CLAIMED TO BELONGIN G TO THE MEMBERS OF THE FAMILY OF THE ASSESSEE. HE HELD THAT HE WAS LEFT WITH NO ALTERNAT IVE BUT TO ACCEPT THE SUBMISSIONS MADE BY THE ASSESSEE ABOUT THE OWNERSHIP OF THE GOLD ORNAMENTS, THAT JEWELLRY TO THE EXTENT OF 975 GMS. STOOD EXPLAINED IN VIEW OF THE WEALTH TAX RETURNS FILED B Y VARIOUS PERSONS. ABOUT THE BALANCE JEWELLRY,TO THE EXTENT OF 588.9GMS (1563-975 GMS),HE HELD THAT IT REMAINED UNEXPLAINED DUE TO LACK OF PROPER EVIDENCES. FINALLY,HE UPHELD THE ADDITION, MADE BY THE AO TO THAT EXTENT. ABOUT THE SEIZED AMOUNT OF RS. 2.60 LAKHS,HE HELD T HAT LEGAL HEIRS OF THE ASSESSEE HAD NOT BEEN ABLE TO EXPLAIN THE SEIZED CASH, THAT THEY HAD NOT PRODUCED NECESSARY DOCUMENTS BEFORE THE AO DURING THE ORIGINAL ASSESSMENT PROCEEDINGS, THAT TH E ASSESSEE HAD BEEN FILING THE RETURNS AT LOSSES FROM THE TEXTILE BUSINESS,THAT IN THE RETURN OF INC OME FILED BY HIM FOR THE YEAR UNDER CONSIDERATION, HE HAD SHOWN A MEAGER INCOME OF RS. 15,036/-, THAT THESE FACTS DID NOT JUSTIFY THE AVAILABILITY OF CASH AMOUNTING TO RS. 2.60 LAKHS WITH HIM AT HOME F OUND AT THE TIME OF SEARCH. HE FINALLY HELD 3 ITA NO. 676/M/2014 SMT. VINODA B. JAIN THAT THERE WAS NO INFIRMITY FOR THE ORDER OF THE AO TREATING THE ABOVE CASH FOUND FROM THE ASSESSEE AS UNEXPLAINED ASSET U/S 69 OF THE ACT.HE CONFIRMED THE ORDER OF THE AO. 3. DURING THE COURSE OF HEARING BEFORE US,AR STATED TH AT ASSESSEE HAD REQUESTED THE AO IN NOVEMBER 1996 TO FURNISH HIM THE COPY OF REASONS RE CORDED, THAT IN FEBRUARY 1997 THE THEN AO WAS AGAIN REQUESTED TO FURNISH THE COPY,THAT THE AO DID NOT SUPPLY THE COPY OF THE REASONS, THAT EVEN AFTER FILING THE RETURN OF INCOME ON 26.11.199 6 THE ASSESSEE WROTE SEVERAL LETTERS REGARDING FURNISHING THE COPY OF THE REASONS RECORDED, THAT T ILL DATE ASSESSEE HAD NOT RECEIVED ANY REPLY FROM THE AO OR THE REASONS RECORDED BY HIM.HE RELIED UPO N THE JUDGMENTS OF GKN GKN DRIVESHAFTS (INDIA) LTD. (259 ITR 19), RAI SINGH DEB SINGH BIST AND ANOTHER (88 ITR 200), L. SOHANARAJ & OTHERS (322 ITR 213) AND BIDESH SANCHAR NIGAM LTD. (340 ITR 66).HE FURTHER ARGUED THAT ASSETS RELATABLE TO THE DOCUMENTS WERE REQUISITIONED BY TH E DEPARTMENT U/S.132A OF THE ACT,THAT ASSESSMENT HAD TO BE MADE UNDER CHAPTER XIV-B OF THE ACT, THAT REASSESSMENT PROCEEDINGS U/S. 148 WERE AGAINST THE PROVISION OF LAW. HE RELIED UP ON THE JUDGMENTS OF CHANDRA PRAKASH AGRAWAL (287 ITR 172), SMT. MIRA ANANTA NAIK & ORS. (221CTR 149),CARGO CLEARING AGENCY (218 CTR 541) AND PRAKASH JEWELLERS (261 CTR 195).DEPARTMENT AL REPRESENTATIVE (DR) SUPPORTED THE ORDER OF THE FAA. 4. RECORDING AND SUPPLY OF REASONS U/S.147-148 HAS BEE N SUBJECT MATTER OF A LOT OF LITIGATION FROM THE VERY BEGINNING.AS EARLY AS 1933 THE ISSUE WAS D ELIBERATED UPON BY THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF ANGLO-PERSION OIL CO. (INDIA) LTD.(1ITR129).WITH THE PASSAGE OF TIME THE LAW RELATING TO RE-OPENING OF COMPLETED ASSESSMENT DEVELOPED AND IN THE CASE OF GKN DRIVESHAFTS (INDIA) LTD.,THE HONBLE APEX COURT FIN ALLY RESOLVED THE ISSUE AS UNDER: WHEN A NOTICE UNDER SECTION 148 OF THE INCOME-TAX A CT, 1961, IS ISSUED, THE PROPER COURSE OF ACTION FOR THE NOTICE IS TO FILE THE RETURN AND, IF HE SO DESIRES, TO SEEK REASONS FOR ISSUING THE NOTICES.THE ASSESSING OFFICER IS BOUND TO FURNISH R EASONS WITHIN A REASONABLE TIME.ON RECEIPT OF REASONS, THE NOTICE IS ENTITLED TO FILE OBJECTIONS TO ISSUANCE OF NOTICE AND THE ASSESSING OFFICER IS BOUND TO DISPOSE OF THE SAME BY PASSING A SPEAKING ORDER. (259ITR19). THE ABOVE JUDGMENT OF THE HONBLE SUPREME COURT HAS BEEN FOLLOWED BY VARIOUS HONBLE COURTS WHILE DEALING WITH THE ISSUE OF RECORDING OF REASON S OR SUPPLY OF RECORDED REASONS TO THE ASSESSEE.IN THE MATTER OF GEHNA A WRIT WAS FILED BY THE ASSESSEE BEFORE THE HONBLE RAJASTHAN HIGH COURT,AS THE REASONS RECORDED WERE NOT SUPPLIE D.DECIDING THE MATTER THE HONBLE COURT HELD AS UNDER:( 267 ITR 782) WHERE A NOTICE UNDER SECTION 148 OF THE INCOME-TAX ACT, 1961, IS ISSUED, THE PROPER COURSE OF ACTION FOR THE NOTICE IS TO FILE THE RETURN AND, IF HE SO DESIRES, TO SEEK REASONS FOR ISSUING THE NOTICES. THE ASSESSING OFFICER IS BOUND TO FURNISH REASONS WITHIN A REASONABLE TIME. ON RECEIPT OF REASONS, THE NOTICE IS ENTITLED TO FILE OBJECTIONS TO ISSUANCE OF NOTICE AND THE ASSESSING OFFICER IS BOUND TO DISPOSE OF THE SAME BY PASSING A SPEAKING ORDER. IN THE MATTER OF FISHER-XOMOX SANMAR LTD.,THE HONB LE MADRAS HIGH COURT(271 ITR 39), FOLLOWING THE JUDGMENT OF GKN DRIVESHAFTS (INDIA) LTD. OF THE HONBLE SUPREME COURT HELD THAT THE AO HAS TO SUPPLY THE REASONS RECORDED TO THE AS SESSEE,ONCE HE FILES RETURN AND ASKS FOR THE COPY OF THE REASONS RECORDED. IN THE MATTER OF (272ITR643)THE HONBLE RAJASTHAN HIGH COURT HELD THAT THE ASSESSING AUTHORITY IS BOUND ( EMPHASIS BY US ) TO COMMUNICATE TO AN ASSESSEE REASONS FOR ISSUANC E OF THE NOTICE, ISSUED UNDER SECTION 148 OF THE ACT,WITHIN A REASONABLE TI ME. LATER ON THE HONBLE KARNATAKA HIGH COURT HAS DEALT THE ISSUE AS UNDER,IN THAT CASE OF KARNATAKA GOLF ASSOCIATION(275ITR297) WHENEVER THE INCOME-TAX DEPARTMENT PROPOSES TO REO PEN A CONCLUDED ASSESSMENT, IT IS BUT NECESSARY THAT THE DEPARTMENT SHOULD DISCLOSE THE R EASONS FOR SUCH REOPENING IF THE ASSESSEE REQUESTS FOR THE SAME. ON RECEIPT OF A NOTICE OF TH IS NATURE, IT IS THE DUTY OF THE ASSESSEE TO FILE I TS RETURN AND RESPOND TO THE NOTICE.DISCLOSURE OF REAS ONS BY THE DEPARTMENT IS FOR THE PURPOSE OF ENABLING THE ASSESSEE TO FILE ITS REPLY AND OBJECTI ONS EFFECTIVELY IN THE CONTEXT OF THE PROPOSAL FOR REOPENING AND IN FURNISHING ITS STAND OR INFORMATIO N. 4 ITA NO. 676/M/2014 SMT. VINODA B. JAIN IN THE CASE OF MITHLESH KUMAR TRIPATHI THE HONBLE ALLAHABAD HIGH COURT HAS DEALT THE ISSUE IN DETAIL(280ITR216).WE WILL LIKE TO REPRODUCE THE REL EVANT PORTION OF THE JUDGMENT AND SAME READS AS UNDER: THE STATUTE CONFERS JURISDICTION AND EMPOWERS THE ASSES SING OFFICER UNDER SECTION 148(2) OF THE ACT TO REOPEN ASSESSMENT PROCEEDINGS. SECTION 148(2) EXPRESSLY REQUI RES RECORDING OF REASONS WHICH HAS A DEFINITE PURPOSE (AND IS NOT A MERE FORMALITY ON PAPER), I.E., TO AVOID ARBITRARINESS OR BIASED OR MALA FIDE ACTION BY THE TAXING AUTHORITIES.SECTION 148(2) IS SILENT REGARDING COM MUNICATION OF REASONS.THE PROVISION HAS TO BE INTERPRETED IN A MANNER WHICH MAKES IT MEANINGFUL A ND PURPOSIVE.KEEPING THE OBJECT OF THE LEGISLATURE IN MIND, THE COURTS, INCLUDING THE SUPREME COURT, HAVE INTERPRETED THE SECTION BY LAYING DOWN THAT REASONS HAVE TO BE COMMUNICATED , AS OTHERWISE THE SAME WILL REMAIN A MERE FORMALITY WITH NO ULTIMATE PURPOSE OR OBJECT TO BE SERVED(EMPHASIS BY US) .THERE IS ALSO NOTHING IN SECTION 148(2) OF THE ACT INDIC ATING EXPRESSLY OR OTHERWISE, THAT AN ASSESSEE CAN ASK FOR REASONS TO BE COMMUNICATED ONLY AFTER HE HAS FILED A REVISED RETURN IN RESPONSE TO THE NOTICE UNDER THAT SECTI ON. THE RECORDING OF REASONS AND OBTAINING APPROVAL TO GIVE NOTICE MAY BE ADMINISTRATIVE ACTION BUT THE VERY ACT OF GIVING NOTICE BACKED BY GOOD AND VALID REASONS UNDER SECTION 148(2) OF THE ACT IS A QUASI-JUDI CIAL FUNCTION. IF REASONS ARE SUPPLIED ALONG WITH THE NOTICE UNDER SECTION 148(2), IT WILL OBVIATE UNNEC ESSARY HARASSMENT TO THE ASSESSEE AS WELL AS TO THE REVENUE BY AVOIDING UNNECESSARY LITIGATION WHICH WILL SAVE COURTS ALSO FROM BEING INVOLVED IN UNPRODUCTIVE LITIGATIONS. ABOVE ALL IT WILL BE IN CONSONANCE WITH THE PRINCI PLES OF NATURAL JUSTICE.(EMPHASIS SUPPLIED) IN THE MATTER OF KLM ROYAL DUTCH AIRLINES(292ITR49) ,THE HONBLE DELHI HIGH COURT HAS HELD THAT REASON TO BELIEVEFOR ISSUING A REASSESSMENT-NOTIC E CONSTITUTES THE SPRINGBOARD FOR THE SECTION 147/148 ACTION AND SIMULTANEOUSLY OR IMMEDIATELY AFTER THE ASSESSEE FILES A RETURN, IN COMPLIANCE OF THE NOTICE,IT WOULD BE ENTITLED TO BE APPRISED OF THE REASONS.THE HONBLE PUNJAB AND HARYANA HIGH COURT IN THE MATTER OF VIDYA SAGA R(305ITR124)HAS HELD AS UNDER: WHEN A NOTICE UNDER SECTION 148 OF THE INCOME-TAX ACT, 1961, I S ISSUED, THE PROPER COURSE OF ACTION FOR THE NOTICE IS TO FILE A RETURN AND IF HE SO DESIRES, TO SEEK REASONS FOR ISSUING NOTICE. THE ASSESSING OFFICER IS BOUND TO FURNISH REASONS WITHIN A REASONABLE TIME. IN THE MATTER OF A. G. HOLDINGS PVT. LTD.(352ITR364 )HAS ANALYSED THE SCHEME OF REOPENING OF ASSESSMENT,AS ENVISAGED BY SECTIONS 147-149 OF THE ACT,IN FOLLOWING MANNER: THERE IS NO REQUIREMENT IN SECTION 147 OF THE INCO ME-TAX ACT, 1961, OR SECTION 148 OR SECTION 149 THAT THE REASONS RECORDED FOR REOPENING AN ASSESSME NT SHOULD ALSO ACCOMPANY THE NOTICE OF REASSESSMENT ISSUED UNDER SECTION 148. THE REQUIREM ENT IN SECTION 149(1) IS ONLY THAT THE NOTICE UNDER SECTION 148 SHALL BE ISSUED. THERE IS NO REQU IREMENT THAT IT SHOULD ALSO BE SERVED ON THE ASSESSEE BEFORE THE PERIOD OF LIMITATION. THERE IS ALSO NO REQUIREMENT IN SECTION 148(2) THAT THE REASONS RECORDED SHALL BE SERVED ALONG WITH THE NOT ICE OF REOPENING THE ASSESSMENT. THE REQUIREMENT, WHICH IS MANDATORY, IS ONLY THAT BEFOR E ISSUING THE NOTICE TO REOPEN THE ASSESSMENT THE ASSESSING OFFICER SHALL RECORD HIS REASONS FOR DOING SO.THE ASSESSING OFFICER IS DUTY BOUND TO SUPPLY THE REASONS RECORDED FOR REOPENING THE ASSES SMENT TO THE ASSESSEE , AFTER THE ASSESSEE FILES THE RETURN IN RESPONSE TO THE NOTICE ISSUED UNDER S ECTION 148 AND ON HIS MAKING A REQUEST TO THE ASSESSING OFFICER TO THAT EFFECT.(EMPHASIS BY US.) IN THE MATTER OF ACORUS UNITECH WIRELESS P. LTD. (3 62ITR417)THE HONBLE DELHI COURT HAS HELD THAT THE LAW REQUIRES THAT THE INFORMATION OR MATER IAL ON WHICH THE AO RECORDS HIS OR HER SATISFACTION IS COMMUNICATED TO THE ASSESSEE.RECENT LY,THE HONBLE COURT REITERATED THE SAME PRINCIPLE WHILE DECIDING THE MATTER OF SAMSUNG INDI A ELECTRONICS P. LTD.(362 ITR 460) AND HELD THAT THE AO WAS DUTY BOUND TO SUPPLY THE REASONS RE CORDED BY IT. 4.1. WE ARE OF THE OPINION THAT THE EFFECT OF REOPENING IS TO PARTLY VACATE OR SET ASIDE THE ORIGINAL ORDER OF ASSESSMENT AND TO SUBSTITUTE IT AND THE CO NCEPT OF ESCAPEMENT OF INCOME INCLUDES BOTH NON-ASSESSMENT OR UNDERASSESSMENT.WHATEVER MAY BE T HE REASON BUT IT IS MANDATED BY THE HONBLE COURTS THAT REASONS TO BELIEVE MUST NECESSA RILY SHOW, INDICATE AND COMMUNICATE WHY AND FOR WHAT GROUNDS/CAUSE ANY INCOME HAS ESCAPED ASSES SMENT.RECORDING OF REASONS HAS BEEN EMPHASISED AND ADVERTED TO AS THE FOUNDATION OF THE JURISDICTION OF AN AO,WHO INITIATES REASSESSMENT PROCEEDINGS.THE VALIDITY OF THE REASSE SSMENT PROCEEDINGS IS TESTED,BY THE HONBLE COURTS,ON THE BASIS OF THE UNDERLYING REASONING STA TED AND RECORDED FOR OPENING OF THE REASSESSMENT.IF THE PERSON AFFECTED BY THE ACTION O F THE AO IS NOT AWARE AS TO WHY THE AO HAD FOUND IT FIT TO REOPEN HIS ASSESSMENT,HE WILL BE IN DARK AND WILL NOT BE IN POSITION TO DEFEND HIMSELF.PRINCIPLES OF NATURAL JUSTICE DEMAND THAT N OBODY SHOULD BE PENALISE UNHEARD. WITHOUT 5 ITA NO. 676/M/2014 SMT. VINODA B. JAIN FURNISHING THE ASSESSEE A COPY OF THE REASONS RECOR DED WOULD TANTAMOUNT TO PUNISH THE ASSESSEE WITHOUT HEARING HIM.THE POWER OF THE TO ISSUE NOTIC E U/S.147 OF THE ACT IS COUPLED WITH THE DUTY TO FOLLOW A PRESCRIBED METHOD.A DUTY HAS BEEN CAST UPON HIM TO SUPPLY THE COPY OF REASONS RECORDED TO THE ASSESSEE.RIGHTS ARE ALWAYS ACCOMPAN IED BY DUTIES AND BIGGER RIGHTS BRINGS HIGHER THE DUTIES IN PICTURE.POWER GIVEN TO THE AO BY SECT ION 147 IS NOT A SIMPLE POWER IT IS TO UNSETTLE THE COMPLETED PROCEEDINGS AND IT GENERALLY RESULTS IN HIGHER TAX LIABILITY.THEREFORE, SAFEGUARDS HAVE BEEN PROVIDED IN THE ACT. DUTY OF THE AO TO CO MMUNICATE THE REASONS TO THE ASSESSEE IS THE OTHER SIDE OF THE COIN AND IS THE RIGHT OF THE ASSE SSEE.THE ASSESSEE CANNOT BE BURDENED ONLY WITH DUTIES.HIS DUTY IS TO FILE THE RETURN ONCE HE GETS THE NOTICE.SIMILARLY,HIS RIGHT TO KNOW THE REASONS STARTS ONCE HE FILES A RETURN AND ASKS THE AO TO SU PPLY HIM THE COPY OF RECORDED REASONS.HIS RIGHT HAS THE SAME SANCTITY THAT OF THE RIGHT OF THE AO. 5.AS THE QUESTION OF SUPPLY OF REASONS RECORDED BY THE AO WAS RAISED BY THE ASSESSEE,SO,WE DIRECTED THE DEPARTMENTAL REPRESENTATIVE(DR),ON 05. 09.2014,TO PRODUCE THE RECORDS TO VERIFY AS WHETHER THE REASONS WERE RECORDED BY THE AO AND WHE THER SAME WERE SUPPLIED TO THE ASSESSEE.THIS ISSUE WAS NOT BEFORE THE FAA AND THE ASSESSEE HAS RAISED IT AS ONE OF THE GROUNDS(GOA-3).WE ARE OF THE OPINION THAT THE ISSUE GOES TO THE VERY ROOT OF THE MATTER AND HAS TO BE DECIDED FIRST,AS IT INVOLVES THE JURISDICTION AL ISSUE.ON 19.09.2014,THE AO APPEARED BEFORE THE BENCH ALONG WITH THE RECORDS.BEFORE US,THE DR S TATED THAT DEPARTMENT WAS IN POSITION TO PRODUCE THE REASONS RECORDED OR THE PROOF OF SUPPLY THE COPY TO THE ASSESSEE OF THE REASONS,THAT RECORDS WERE NOT AVAILABLE OR TRACEABLE.WE FIND THA T THE ASSESSEE HAD ASKED THE AO AS EARLY AS 08.11.1996 TO FURNISH HIM A COPY OF REASONS RECORDE D(PAGE 728-729 OF THE PAPER BOOK),THAT ON 10.09.1997THE ASSESSEE MADE SIMILAR REQUEST (PAGE 7 30-731).ON 22.09. 2009,01.10.2009, 21.01.2013, 29.01.2013 (PAGE 724- 740 OF THE PB) VA RIOUS LETTERS WERE ADDRESSED TO THE AO BY THE ASSESSEE TO FURNISH THE COPY OF THE REASONS.IT IS F OUND THAT EVEN AFTER COMPLETION OF THE ASSESSMENT/APPELLATE PROCEEDINGS THE ASSESSEE WAS R EQUESTING THE AO TO SUPPLY HIM THE COPY OF THE REASONS.BUT,TILL THE DATE OF HEARING I.E. ON 19 .09.2014-EVEN AFTER 18 YEARS OF THE ISSUANCE OF 148 OF THE ACT,THE AO IS NOT BEEN ABLE TO PROVE TH AT THE ASSESSEE WAS SUPPLIED COPY OF THE REASONS RECORDED. WE FIND THAT IN THE CASE OF VIDES H SANCHAR NIGAM LTD. (SUPRA) THE HON'BLE HIGH COURT HAS HELD AS UNDER: THE FINDING OF FACT RECORDED BY THE INCOME-TAX APPE LLATE TRIBUNAL IS THAT IN THE PRESENT CASE THE REASONS RECORDED FOR REOPENING OF THE ASSESSMENT TH OUGH REPEATEDLY ASKED BY THE ASSESSEE WERE FURNISHED ONLY AFTER COMPLETION OF THE ASSESSMENT. THE TRIBUNAL FOLLOWING THE JUDGMENT OF THIS COURT IN THE CASE OF CIT V. FOMENTO RESORTS AND HOT ELS LTD., INCOME-TAX APPEAL NO. 71 OF 2006 DECIDED ON NOVEMBER 27, 2006, HAS HELD THAT THOUGH THE REOPENING OF THE ASSESSMENT IS WITHIN THREE YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR, SINCE THE REASONS RECORDED FOR REOPENING OF THE ASSESSMENT WERE NOT FURNISHED TO THE ASSESSE E TILL THE COMPLETION OF ASSESSMENT, THE REASSESSMENT ORDER CANNOT BE UPHELD. MOREOVER, SPEC IAL LEAVE PETITION FILED BY THE REVENUE AGAINST THE DECISION OF THIS COURT IN THE OF CIT V. FOMENTO RESORTS AND HOTELS LTD. HAS BEEN DISMISSED BY THE APEX COURT, VIDE ORDER DATED JULY 16, 2007. IN THIS VIEW OF THE MATTER, THE PRESENT APPEAL IS A LSO DISMISSED WITH NO ORDER AS TO COSTS. IN THE CASE OF TATA INTERNATIONAL LTD. (52 SOT 465) SIMILAR ISSUE HAD BEEN DEALT WITH BY THE TRIBUNAL AS UNDER: AS PER THE RULE OF NATURAL JUSTICE, THE ASSESSEE I S ENTITLED TO KNOW THE REASONS ON THE BASIS OF WHICH THE AO HAS BELIEVED AND FORMED AN OPINION THA T THE INCOME ASSESSABLE TO TAX HAS ESCAPED ASSESSMENT. IT IS NOT UNDERSTANDABLE AS TO WHY THE AO WAS SO RELUCTANT AND HESITANT TO FURNISH THE REASONS ACTUALLY RECORDED FOR REOPENING OF ASSESSME NT. THERE WAS NO REASON AND RATHER JUSTIFIABLE REASONS FOR DEPRIVING THE ASSESSEE OF THE REASONS A CTUALLY RECORDED BY THE AO FOR REOPENING OF THE ASSESSMENT. FURTHER THE REASONS ARE REQUIRED TO BE FURNISHED WITHIN A REASONABLE PERIOD OF TIME SO THAT THE ASSESSEE CAN RAISE THE OBJECTIONS AT THE P RELIMINARY STAGE OF PROCEEDINGS. IF THE REASONS ARE NOT SUPPLIED DURING THE ASSESSMENT PROCEEDINGS, THAN FURNISHING THE REASONS SUBSEQUENT TO THE ASSESSMENT PROCEEDINGS WOULD ACHIEVE NO PURPOSE AND TANTAMOUNT TO DEPRIVE AND DENY THE ASSESSEE OF ITS RIGHT TO RAISE THE OBJECTIONS AGAIN ST THE VALIDITY OF NOTICE ISSUED U/S 148. THUS, THE AC HAS FAILED TO FURNISH THE REASONS RECORDED FOR R EOPENING OF THE ASSESSMENT WITHIN THE 6 ITA NO. 676/M/2014 SMT. VINODA B. JAIN REASONABLE TIME AND RATHER PRIOR TO THE COMPLETION OF ASSESSMENT,THAN THE REASSESSMENT ORDER PASSED WITHOUT SUPPLY OF REASONS AS RECORDED FOR RE OPENING OF THE ASSESSMENT, IS INVALID AND CANNOT SUSTAIN. HENCE, THE REASSESSMENT ORDER SET A SIDE. CONSIDERING THE PECULIAR FACTS AND CIRCUMSTANCES OF THE CASE-ISSUANCE OF NOTICE U/S.148 OF THE ACT,THE REQUESTS MADE BY THE ASSESSEE DURING ASSESS MENT AND AFTER THE ASSESSMENT/APPELLATE PROCEEDINGS,THE INABILITY OF THE AO TO PRODUCE THE REASONS RECORDED OR TO PRODUCE THE EVIDENCE OF SUPPLY OF THE COPY OF REASONS TO THE ASSESSEE-WE AR E OF THE OPINION THAT VALIDITY OF THE ASSESSMENT ORDER AND THE SUBSEQUENT ORDER OF THE FAA CANNOT BE UPHELD. THEREFORE, RESPECTFULLY FOLLOWING THE JUDGMENTS OF THE JURISDICTIONAL HIGH COURT DELI VERED IN THE CASES OF VIDESH SANCHAR NIGAM LTD. AND FOMENTO RESORTS AND HOTELS,WE ARE OF THE O PINION THAT THE ORDER PASSED BY THE AO WAS NOT VALID.THE ACTION OF THE AO HAS RESULTED IN VIOL ATION OF BASIC PRINCIPLES OF NATURAL JUSTICE AS WELL AS INVALUABLE RIGHT OF THE ASSESSEE.HIS ORDER IS BEYOND VALIDITY,SO IT IS UNSUSTAINABLE. AS WE HAVE DECIDED THE JURISDICTIONAL ISSUE IN FAVO UR OF THE ASSESSEE, SO WE ARE NOT DECIDING THE OTHER GROUNDS OF APPEAL TAKEN BY THE ASSESSEE AS WE LL AS THE ADDITIONAL GROUNDS RAISED BY HIM. AS A RESULT, APPEAL FILED BY THE ASSESSEE STANDS AL LOWED. /5 /5 /5 /5 ./ ./ ./ ./ 6 6 6 6 ' 7 ' 7 ' 7 ' 7 1 11 1 3 33 3 (8/ (8/ (8/ (8/ 1 11 1 # / # / # / # / 9 99 9 . ORDER PRONOUNCED IN THE OPEN C OURT ON 24TH SEPTEMBER,2014 . '$4 '$4 '$4 '$4 1 11 1 2) 2) 2) 2) $ $ $ $ % % % % : :: : ;' ;' ;' ;' 24 /< /< /< /< , 201 4 1 11 1 3 33 3 = == = SD/- SD/- ( . / D.MANMOHAN) ( #$%& #$%& #$%& #$%& / RAJENDRA) !' / VICE PRESIDENT $ $ $ $ '( '( '( '( /ACCOUNTANT MEMBER / MUMBAI, ;' /DATE: 24.09.2014. SK '$4 '$4 '$4 '$4 1 11 1 ,/> ,/> ,/> ,/> ?$>)/ ?$>)/ ?$>)/ ?$>)/ / COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE / *+ 2. RESPONDENT / ,-*+ 3. THE CONCERNED CIT(A)/ @ A , 4. THE CONCERNED CIT / @ A 5. DR F BENCH, ITAT, MUMBAI / >B 3 ,/ , , . . % . 6. GUARD FILE/ 3 - >/ - >/ - >/ - >/ ,/ ,/,/ ,/ //TRUE COPY// '$4 / BY ORDER, / # DY./ASST. REGISTRAR , /ITAT, MUMBAI